The Finance Ministry’s latest report, titled ‘Statement on Fiscal Constraints,’ shows a substantial increase in fuel and electricity subsidies for the current fiscal year.
Initially, the budget allocated MVR 594 million for these subsidies, and it is now projected to triple to MVR 1.5 billion by the end of the fiscal year.
Comparatively, the government initially set aside MVR 530 million in the previous fiscal year for oil and power subsidies, but the actual spending ballooned to MVR 3 billion.
The government is restructuring its subsidy policy to ensure the sustainability of fuel subsidies. Instead of a uniform subsidy, they target individuals needing it the most.
Although the current fiscal year’s budget included provisions for fuel subsidies based on specific criteria, implementation has been postponed due to concerns about potential increases in power tariffs and added burdens on households and businesses.
The Finance Ministry is actively exploring ways to transform the subsidy system into a more targeted and efficient approach, even though this idea has been consistently mentioned in budgets over the past five years, with no substantial changes to subsidy criteria to date.
Subsidies have already exceeded the budgeted amount for this year, with MVR 7.1 billion spent, surpassing the allocated budget by MVR 500 million.
